NY budget deal details draw critics from business

Friday

Mar 22, 2013 at 7:41 AMMar 22, 2013 at 7:42 AM

ALBANY, N.Y. - (AP) -- The lives of the working poor to millionaires, schoolchildren to teachers, and employers and unemployed war veterans would be touched under a tentative New York state budget deal.

The provisions were among some details surfacing Thursday, a day after Gov. Andrew Cuomo and legislative leaders announced a "conceptual framework" of a budget that could be voted on beginning Saturday.

Cuomo and legislative leaders announced the deal with few details on Wednesday night. They proclaimed it a low-spending budget "with no new taxes" that serves the business community and families with tax cuts and breaks. Most of those tax cuts and a $350 tax rebate to middle class families with children, however, won't kick in until 2014, an election year for the governor and lawmakers.

To pay for much of the tax cuts, the budget deal includes a second extension of a temporary $2 billion income tax increase on millionaires. Cuomo and Senate Republicans had vowed to oppose the tax increase in their 2010 campaigns. They called it a job killer that would compound New York's image as a high-tax state. The tax hike doesn't expire until next year, but that's an election year when extending a tax increase would be sensitive. So, the leaders agreed to extend it this year, instead, saying it is part of their new two-year budgeting process.

A senior administration official told The Associated Press that the extension was needed to pay for tax cuts sought by the Senate Republicans that, in turn, provided a trade-off to accept an increase in the minimum wage, sought by the Assembly's Democratic majority. Those two issues were critical to settle the budget.

The official, speaking on condition of anonymity because closed-door negotiations aren't supposed to be made public, said state revenues in a slow recovery forced the extension during budget negotiations.The independent Citizens Budget Commission on Thursday called the latest three-year extension a "short-sighted, politically expedient deal."

The extension "continues the state's reliance on a small number of high earners and reduces New York's competitiveness," stated the CBC's analysis called "A Disappointing Tax Deal."

The CBC said the leaders are extending a "temporary" tax increase that was created to address a fiscal crisis in 2009, but now using it for "poorly targeted tax relief." The CBC says that sends the wrong message to wealthy New Yorkers who the state has long depended for most of its tax revenues.

Without the ill-advised tax extension in the budget deal, "the money is not there to spend on newly created rebate and credit program," the CBC said.

The commission, however, credits the budget deal for keeping the spending increase under 2 percent and for being on track to approving a spending plan on time -- by April 1 -- for the third straight year.

"Two years ago, our state was facing significant challenges, with constant spending and tax increases chasing businesses and people from our state and scandals making our government a joke," Cuomo said Thursday. "Today's agreement shows New York is on the move and is rising once again."

Some advocates for the poor also had a chance to review the centerpiece of the budget deal, an increase in the minimum wage to $9 that would be spread over three years without automatic increases tied to inflation. The $7.25-an-hour wage would rise to $8 in January, $8.75 a year later and cap at $9 a year after that.

"Eight dollars is morally unacceptable," said Mark Dunlea of the Hunger Action Network. He called a $9 wage "pathetically low."

"Lawmakers continue to force the lowest income workers to work for sub-poverty wages," Dunlea said.Frank Mauro, an analyst with the progressive Fiscal Policy Institute, said the new minimum wage won't be enough. He said the new wage would have to rise to $11.15 to match the buying power of the poor under the minimum wage of 1970s.

"We need to return their purchasing power," Mauro said.

Business groups also complained.

The budget deal "sends a difficult and regressive message to small business owners across New York," said Mike Durant of the National Federation of Independent Business. The group opposed the minimum wage hike. But it is also upset the budget deal won't let a big utility tax known as "18-a" to expire, as the law provides. Instead, the budget deal will phase the tax out over three years.

"New York has long suffered from an anti-business, high taxed reputation," Durant said. "The extension of the high earner tax rate will only continue to leave New York behind the rest of the nation in economic competitiveness."

The tentative deal for a New York state budget includes several measures for schools, which will see a bump of nearly $1 billion in the state's more than $20 billion school aid fund. That's an increase over the $890 million hike Cuomo proposed before the legislative negotiations took place.

The deal also includes $350 tax rebates to middle-class families with at least one child and a household income between $40,000 and $300,000. The checks wouldn't be sent to taxpayers until 2014.

The budget deal includes $25 million to expand pre-kindergarten in low-income schools, $25 million to help school districts extend the school day and year, and $15,000 in annual stipends for top teachers.Tax cuts and tax credits will be spread over three years, with most effective in the 2014 election year. They would include a $10,000 credit for hiring a veteran who joined the service since the 2001 terrorist attacks. Hiring a disabled veteran would draw a $15,000 credit.